The Shelling out of America

AP Analysis: Firms Crimping Oil Supplies
 
[...] Why would Shell Oil Co. simply close its Bakersfield refinery? Why scrap a profit maker?

The rumor seemed to make no sense. Yet it was true.

The company says it could make more money on other projects. It denies it intended to squeeze the market, as its critics would claim, to drive up gasoline profits at its other refineries in the region.

Whatever the truth in Bakersfield, an Associated Press analysis suggests that big oil companies have been crimping supplies in subtler ways across the country for years. And tighter supplies tend to drive up prices.

The analysis, based on data from the U.S. Energy Information Administration, indicates that the industry slacked off supplying oil and gasoline during the prolonged price boom between early 1999 and last summer, when prices began to fall.
[...]
_During the 1999-2006 price boom, the industry drilled an average of 7 percent fewer new wells monthly than in the seven preceding years of low, stable prices.

_The national supply of unrefined oil, including imports, grew an average of only 6 percent during the high-priced years, down from 14 percent during the previous span.

_The gasoline supply expanded by only 10 percent from 1999 to 2006, down from 15 percent in the earlier period.
[...]
A 2001 study by the Federal Trade Commission reported that some firms were deciding to "maximize their profits" by crimping supply during a Midwestern gasoline price spike. One executive told regulators "he would rather sell less gasoline and earn a higher margin on each gallon sold."

This year, the FTC reported that some oil companies were storing oil, instead of selling it right away, to await higher prices anticipated in the future.

The industry has shelved an average of 21 percent more unrefined oil from the start of 2004 through last June, the AP analysis indicates. Last spring, stocks of shelved crude reached their highest level in eight years, despite the fabulous riches at hand in high prices then.
[...]
Thanks to mergers, the top 10 companies now control three-quarters of national refining capacity, up from half in the early 1990s.